Denim stocks rise as markets fall

12 Dec '05

2 min read

Ending of the textile quotas in turn rejuvenating the global textile industry and promising steady import opportunities, denim stock prices have risen significantly indicating that they are back in fashion.

But globally, denim manufacturers are producing stocks much faster and far outstripping demand.

Excess supply than the demand means cost cutting and lower margins for producers.

During April 2003 and March 2005, denim demand increased after years of down spiral with leading denim makers booking huge profits.

For instance, Raymond registered a gain of 259 percent, while Arvind Mills and Aarvee Denim grew 520 percent and 678 percent, respectively, causing the BSE Sensex to move up 110.7 percent.

However, since the ending of quotas beginning 2005, denim makers saw a decline in the demand.

Sources report soaring price pressure due to overflowing supply in the world market, and India's inadequate denim garments capacity which is further making it difficult for Indian players to remain competitive.

Last fiscal, however, global consumption of denim looked up once again, at 3-4 percent growth and domestic demand appeared healthy at about 10-12 per cent.

Sales volume of domestic players was up 16.5 percent on an average and realisations improved 4.3 percent during the same year.

However, the textiles analysts at BRICS Private Clients Group considers this a temporary phase and may probably last up to two or three more quarters.

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